Eldred/Roth: Guide to Marx's Capital (1978)

Paper 4

The Forms of Appearance of Surplus-Value:
Profit of Enterprise, Interest and Rent

The analysis of the ground-form of capital has
revealed the source of the valorisation of capital: it is the
surplus-labour time of productive wage-labourers. Which forms are
taken on by surplus-value on the surface of capitalist society?
Before we can answer this question we have to investigate the
transformed form of surplus-value, average profit.

Average Profit

The analysis of the transformation of surplus-value
into average profit starts from the concept of cost-price (k
"Kostpreis") (SG 120). Herein the distinction between the
production of new value (v + s) and the transfer of old value (c)
is suspended in practice: k = c + v. Cost-price is just the sum of
money necessary for starting a profit-making process. At the most
abstract level profit (SG 120) is determined here as the difference
in magnitude of value between selling-price (SG 120) of the
produced commodity and cost-price of the elements of production. We
can distinguish between two forms of competition of capitals (SG
121): one which occurs within the sphere where the producers of the
same kind of commodity compete and one between the different
spheres of production where the aggregate capitals of the different
spheres compete for a share in the total social surplus-value
produced. The share of the surplus-value which falls to a capital
as the end result of this competition is called profit (p). Profit
always refers to the return on the total capital advanced. As
opposed to the rate of surplus-value s/v, the rate of profit is
p/(c + v).

"Now, if the commodities are sold at their values,
then as we have shown, very different rates of profit arise in the
various spheres of production, depending on the different organic
composition of the masses of capital invested in them. But capital
withdraws from a sphere with a low rate of profit and invades
others which yield a higher profit. Through this incessant outflow
and influx, or briefly, through its distribution among the various
spheres, which depends on how the rate of profit falls here and
rises there, it creates such a ratio of supply to demand that the
average profit in the various spheres of production becomes the
same, and values are, therefore converted into prices of
production." (CIII 195f).

The production price is that selling price which enables the
sphere of capital to make average profit (SG 122). To the extent
that production price becomes general the spheres of capital become
mere shareholders of the joint-stock company 'social
capital' (cf. CIII 158). The share of one sphere of production
in the aggregate surplus-value is determined by the ratio of the
advanced capital in that sphere to the aggregate capital,
independently of organic composition (c/v) and the turnover of
variable capital, both of which are crucial for surplus-value
production. This equalised rate of profit of all spheres we call
the rate of average-profit. The surplus-value which is produced in
one sphere of production does not determine the profit of that
sphere. Average profit as a transformed form of the socially
expropriated surplus-value is an expression of a social relation:
the exploitation of the working-class by the capitalist class.

If we move on from the spheres of capital to the individual
capitalist within the spheres, the competition between producers of
the same type of commodity and the competition for average profit
together determine the selling-price. After the analysis of the
average rate of profit of the different spheres has been done the
effects of different individual conditions of production i.e.
differences in the productivity of individual capitals within one
sphere can be articulated as differences of individual cost-prices.
But an identical price is paid for commodities of the same kind, a
unified market-price (SG 123). We can make a distinction between
three forms of profit that exceed average profit (SG 124):

1) Extra-profit stemming from selling the commodity at its
production price with production of the commodity at an individual
cost-price lower than the average cost-price in that sphere
("extra-profit1").

2) Extra-profit stemming from selling the commodity at a
market-price which, as a result of a monopoly of that sphere and
organic composition below the social average, is higher than the
production price but still below the value of that commodity
("extra-profit2").

3) Extra-profit stemming from selling a commodity at a
"monopoly price proper" (eigentlicher Monopolpreis),
which is higher than the production price and higher than the value
of the commodity ("extra-profit3").

The analysis of capitalist ground-rent will start from these
three forms of extra-profit (differential ground-rent, absolute
ground-rent and monopoly rent respectively whereas the analysis of
the other two forms of appearance of surplus-value, profit of
enterprise and interest, deals with the division of average profit
itself. Before dealing with these forms of appearance we outline
two other aspects of average profit, firstly the tendency of the
rate of profit to fall and secondly that the "final form"
(CIII 388) of average profit includes the participation of
merchant's capital in social surplus-value.

A Remark on the Tendency of the Rate of Profit to Fall

The capitalist mode of production includes
substitution of living labour-power by labour objectified in
machinery. Along with this application of machinery for the
production of relative surplus-value, therefore, the contradiction
that the rate of surplus-value can only be increased by diminishing
the number of labourers relative to the magnitude of the total
capital (c + v) (cf. CI 383). As average profit distributes the
aggregate social surplus-value to the different spheres of capital,
the magnitude of the rate of profit is influenced by the
substitution of living labour-power by machinery if the increase of
the rate of surplus-value does not compensate for the change in the
organic composition of capital and therefore the relative decrease
of the variable part of capital. For an individual capital this
contradiction does not present itself in everyday practice:

"A saving of labour -not only labour necessary to
produce a certain product, but also the number of employed
labourers - and the employment of more congealed labour (constant
capital), appear to be very sound operations from the economic
standpoint and do not seem to exert the least influence on the
general rate of profit and the average profit. How could living
labour be the sole source of profit, in view of the fact that a
reduction in the quantity of labour required for production appears
not to exert any influence on profit? Moreover, it even seems in
certain circumstances to be the nearest source of an increase of
profits, at least for the individual capitalist." (CIII
170)

(For our views on the correct systematic place for the treatment
of the tendency of the rate of profit to fall see the Remarks on
Vol. I, chaps 7-33.)

Commercial Profit

The analysis of the ground-form of capital serves as
a basis for the analysis of commercial capital as a derivative form
of capital. The circuit of capital as analysed in Paper 3 (cf.
Capital Vol. II) has three phases. In the phase of productive
capital surplus-value is created whereas the phases of
money-capital and commodity-capital are unproductive but necessary
for the circulation of value as capital.

At this stage of the analysis, capital is now divided into
industrial capital, which concentrates on the productive phase, and
commercial capital, which deals exclusively with the circulation
phases (SG 125). To the extent that commercial capital does the
work of circulation at a lower cost by means of concentrating the
buying and selling of a number of industrial capitals they create
the economic basis for their existence. The costs of circulation
work have to be paid out of surplus-value. The commercial capital
makes the surplus-value absorbed by unproductive circulation work
the source of its profit insofar as it diminishes the socially
necessary unproductive work. Commercial capital grabs that part of
social surplus-value that corresponds to its share in aggregate
capital. After the acknowledgement of commercial capital as capital
which makes average profit the spheres of circulation become just
one of the spheres of investment of capital (SG 126). Outflow and
influx of capital are determined for this sphere as well, by the
competition for profit between the different spheres which is
mediated by competition within the sphere.

Commercial capital must succeed in pressing down the costs of
circulation work to such an extent that they remain, after the
addition of average profit to the capital advanced, lower than the
amount an industrial capital would have to spend if it did all the
circulation work itself. The division of ground-form capital into
industrial capital and commercial capital is dependent on the ratio
of the production period to the circulation period and the extent
to which circulation work is done by commercial capital (not all
the circulation work can be taken out of the hands of industrial
capital).

In the form of average profit for the ground-form of capital
there is already a quantitative divergence of profit from
surplus-value. Looking at commercial profit we find in addition a
qualitative divergence in that capital which produces no
surplus-value, participates in the distribution of social
surplus-value, through making average profit. All capital which
makes average profit does so on the basis of the exploitation of
productive industrial labourers. All capital which makes average
profit also benefits from an exploitation of the commercial
labourers analogous to that of the industrial labourers: commercial
wage-labourers work part of their time "for nothing" (CII
135).

Two Derived Forms of Surplus-Value: The Division of Average
Profit into Interest and Profit of Enterprise

With commercial capital we have made acquaintance
with the first derived form of capital. Here capital which does not
engage in surplus-value production is nevertheless a profitable
advance of money on the basis that the portion of aggregate capital
engaged in circulation functions is diminished. But we were not
confronted with a derived form of surplus-value. Commercial profit
takes the form of average profit, the transformed form of
surplus-value we already know. When dealing now with
interest-bearing capital we do not find a new participation in
average profit but rather a division of average profit, including
commercial profit, into two parts which are derived forms of
surplus-value: interest and profit of enterprise (SG 128). Here the
same money functions as average profit producing and
interest-bearing, only for two different capitalists. The circuit
of the former (functioning capital) is embedded in the circuit of
the latter and so we could call interest-bearing capital a capital
of 'higher order'. As we deal here with average profit in
its final form the embedded circuit of functioning capital can be
either a circuit of industrial capital or a circuit of commercial
capital.

In overcoming the latency of money-capital caused by necessary
periods of fallow for functioning capital, interest-bearing capital
has its first raison d'etre. Besides overcoming
fallow, the form of interest-bearing capital allows for the
gathering together of several capitals' newly accumulated
surplus-value, each of which is too small to function
independently. Because of the possibility of lending money in
exchange for interest, interest itself becomes a fixed form, the
price of the 'higher order' commodity, capital (SG 129). On
the other hand, this leads to a permanent division of average
profit into interest and the remainder, called profit of
enterprise. Just as interest appears to be a property of money,
profit of enterprise appears to stem from the activity of the
entrepreneur, the functioning capitalist's labour-power, (cf
CIII 382).

A Third Derived Form of Surplus-Value: Transformation of
Extra-Profit into Capitalist Rent.

At this level of the presentation nature (the
unproduced conditions of labour) is given its systematic place.

Landed property is the power to make the use of nature dependent
on paying money to the rentier (SG 130). Capital working on e.g. a
certain plot of land for which it pays rent, can make better than
average profit if that plot of land gives it an advantage over
others so that in addition to average profit an extra-profit is
made which partly or wholly can be transformed into ground-rent.
These natural advantages in production or circulation can be listed
in three groups:

3) Natural limitation of production in a sphere (e.g. as a
consequence of scarcity of a mineral).

The first two advantages result in lowering the individual
cost-price below the average cost-price. The third advantage
enables the seller of the product to ask a market-price above the
price of production. Advantages (1) and (2) are reasons for
extra-profit1. Advantage (3) is a source of
extra-profit2 or extra-profit3 (see the above
section on average profit). By selling products at the price of
production while the individual cost-price is below the average
cost-price, an extra-profit is made as against competing capitals
in the same sphere of production. By selling the product at a
market price above the price of production, the particular sphere
is making extra-profit2 if the price does not exceed the
value of the product, and it makes extra-profit3 against
other spheres of capital if the price exceeds the value.
Extra-profit1 can partially or wholly be transformed
into differential ground-rent (cf. CIII 40ff, 745f) (SG 131),
extra-profit2 into absolute ground-rent (cf. CIII 760ff)
(SG 132) and extra-profit3 into monopoly rent proper
(cf. CIII 762, 832f) (SG 133).

At this level of analysis land itself becomes a commodity (SG
134) whose price is determined by the capitalisation of the
ground-rent which it draws i.e. investment of capital in land draws
ground-rent as interest. The price of the land is therefore
determined as the price of buying the property that draws
ground-rent and is given by the expression rent/(rate of interest).
In this way land becomes a higher order commodity.

Remarks on Capital, Vol. III

The 3rd volume of Capital as we have it now
was set down by Marx essentially in one manuscript, most likely
written in 1865 (before the final draft of Vol. I in 1866/7).
Engels acknowledges: "As the reader will observe from the
following, the work of editing the third volume was essentially
different from that of editing the second" (Where there were
several substantial manuscripts from after 1867 in Engel's
hands and notes by Marx on how to do the selection. E/R). "In
the case of the 3rd volume there was nothing to go by outside a
first extremely incomplete draft. The beginnings of the various
parts were, as a rule, pretty carefully done and even stylistically
polished. But the farther one went, the more sketchy and incomplete
was the manuscript, the more excursions it contained into arising
side-issues, whose proper place in the argument was left for later
decision." (CIII 2)

It seems that material additional to the 1865 manuscript was
only incorporated by Engels into the first part. Chapter 1 was
written by Engels on the basis of "two attempts at
revising" (done by Marx at a time which Engels doesn't
give, cf. CIII 3) Chapter 2 is "taken from the main
manuscript". (CIII 3), but must have been there at a different
place, for Engels states that the manuscript started with the topic
of today's chapter 3. This version was written by Engels on the
basis of Vol. II, "Beginning with Ch. 5, the main manuscript
is the sole source for the remainder of the part" - and indeed
the book - "although many transpositions and supplements were
also essential". (CIII 4)

With parts 2, 3 and 4 Engels claims to have done no more than
"stylistic editing." But he restructured parts 5 (on
interest) and 6 (on rent), cf. CIII 4 and 6f. The theoretically
very important last part "was available complete, but only as
a first draft, whose endlessly involved periods had first to be
dissected to be made printable. There exists only the beginning of
the final chapter." (CIII 7). Engels printed the fragment and
made no attempt to bring it to its systematic end. At the very
beginning of part 7 Engels collected short (but very dense)
passages on the trinitary formula from different places within the
manuscript in its part on ground-rent.

In short: Engels has edited as Vol III of Capital a
draft by Marx done before the final shape of Vol. I came into
being. Engels does not refer to any later hints of Marx on how to
do the editing.

On the contrary, it seems that Marx's view about the matter
is expressed in his letter to Engels on February 13th, 1866.
"Obgleich fertig, ist das Manuskript, riesig in seiner
jetzigen Form, nicht herausgebbar für irgend jemand außer
mir, selbst nicht für Dich." (although finished, the
manuscript, gigantic in its present form, is not editable by anyone
but myself, not even by you).

Does this matter? Only a successful attempt at unfolding the
systematic argument in a dialogue can answer the question.

Part 1

Chapter 1 begins with a passage that could well
function as an introductory remark to Vol 3 of Capital as
a whole; it ends:

"The various forms ("Gestaltungen" MEW
25, p. 33; see also Marx's letter to Kugelmann of October 13,
1866) of capital as evoked in this book … approach step by
step the form ("Form") which they assume on the surface
of society, in the action of different capitals upon one another,
in competition, and in the ordinary consciousness of the agents of
production themselves" (CIII 25).

As regards 'profit' as such a form of appearance we read
in chapter 2:

"The transformation of surplus-value into profit
must be deduced from the transformation of the rate of
surplus-value into the rate of profit, not vice versa ...
surplus-value and rate of surplus-value are, relatively, the
invisible and unknown essence ("das zu erforschende
Wesentliche" MEW 25, p. 53) that wants investigating, while
rate of profit and therefore the appearance of surplus-value in the
form of profit are revealed ("zeigen sich") on the
surface of the phenomenon" (CIII 43).

In our view, as the reader may remember from the remarks on CI
ch 16, the concept of profit does have a systematic meaning in Vol
I already. The difference with respect to 'profit' on the
level of Part 1 Vol. III comes to mind when focusing on the results
of the analysis of the circulation of capital and taking account of
the distinction between circulating and fixed capital (cf. CIII 33)
and considering the annual rate of profit (ch 4, cf. CIII 74
especially).

Chapter 5 deals with a topic that was raised in Parts 3 and 4 of
Vol. I already (cf. CI 251, 308, 365ff.): 'Economy in
Employment of Constant Capital'. The material used for the
illustration of the systematic points is to a great extent
identical: reports of the inspectors of factories for the period
1845 to 1864 (in the case of Vol III chs 5 and 6) and the period
1841 to 1866 (in the case of Vol I).

The claim is expressed (CI 308) already:

"Economy in the use of the means of production has
to be considered under two aspects. First, as cheapening
commodities, and thereby bringing about a fall in the value of
labour-power. Secondly, as altering the ratio of the surplus-value
to the total capital advanced, i.e., to the sum of the values of
the constant and variable capital. The latter aspect will not be
considered until we come to the third book, to which, with the
object of treating them in their proper connexion, we also relegate
many other points that relate to the present question. The march of
our analysis compels this splitting up of the
subject-matter".

This refers to the analysis of relative surplus-value
production. But a similar point can be made with respect to the
analysis of absolute surplus-value production or surplus-value
production in general: "Capital has one single life impulse,
the tendency to create value and surplus-value, to make its
constant part, the means of production, absorb the greatest
possible amount ("Masse" MEW 23, p. 247) of
surplus-labour. Capital is dead labour, that, vampire-like, only
lives by sucking living labour, and lives the more, the more labour
it sucks" (CI 224).

This relation of variable and constant capital can obviously be
looked at from its two opposing sides. In Vol I: the existence of
money in the form of constant capital treated as given, the
analysis of surplus-value production focuses on capital's
tendency to increase surplus-value production. In Vol III: given
the valorisation of capital's variable part ("mass and
rate of surplus-value" CIII 79) the analysis focuses on
capital's tendency to reduce the portion of constant capital in
total capital. The labourers suffer from both alike. Compare Vol I
ch 10 Sec. 4, "Day and Night Work. The Relay System" with
Vol III ch 5 Sec. 2, "Savings in Labour Conditions at the
Expense of the Labourers" and the remark CIII 86:

"Since the labourer passes the greater portion of
his life - a great part anyway - in the process of production, the
conditions of his active living process, or his living conditions,
and economy in these living conditions is a method of raising the
rate of profit; just as we saw earlier (in Vol I) that overwork,
the transformation of the labourer into a work horse, is a means of
increasing capital, or speeding up the production of
surplus-value".

Taking into consideration the distinction between circulating
constant capital and fixed capital as developed in Vol II a number
of different cases of economising the employment of constant
capital or effects of a cheapening of elements of constant capital
are discussed in the 5th and 6th chapters.

Chapter 7, "Supplementary Remarks" is information on
the assumptions of presentation used in Part 1 as opposed to Part
2.

Part 3

In Marx's manuscript of 1864-65 the text of Part
3 has no subtitles. The segmentation into chapters is Engels'
work.

Systematically there are two different strands of
argumentation.

1) Rise in the organic composition in the course of the
development of machinery. This leads to a sinking rate of profit if
not matched by even greater rise in the rate of surplus-value. Cf.
ch 13.

2) "Absolute over-production of capital" (CIII 251)-
"i.e., the increased capital C + ΔC would produce no
more, or even less, profit than capital C before its expansion by
C... there would be a steep and sudden fall in the general rate of
profit, but this time due to a change in the composition of capital
not caused by the development of the productive forces, but rather
by a rise in the money-value of the variable capital (because of
increased wages) and the corresponding reduction in the proportion
of surplus-labour to necessary labour." (cf. ch 15 III)

We take the view that the difficulty for capital which arises
from a rise in the organic composition has to be dealt with at the
end and that the over-accumulation problematic has its systematic
place within the analysis of the revenue-forms when competition and
'bourgeois class-struggle' are dealt with.

Part 4

The sections (our chapters) and their titles - with
the exception of the title of ch 20 - are in the manuscript of
1864-65.

Systematically the most interesting is ch 17. On the problematic
of historical development vs. systematic order cf.:

"In the course of scientific analysis, the
formation of a general rate of profit appears to result from
industrial capitals and their competition, and is only later
corrected, supplemented, and modified by the intervention of
merchants' capital. In the course of its historical
development, however, the process is really reversed. It is the
commercial capital which first determines the prices of commodities
more or less in accordance with their values, and it is the sphere
of circulation, the sphere that promotes the process of
reproduction, in which a general rate of profit initially takes
shape". (CIII 287)

Part 5

Of this part comprising two component parts, the
first one (chs 21-28) is more structured and systematically more
relevant. The second one's subtitles cannot be found in the
1864-65 manuscript. Engels acknowledges in his editorial note:
"The real difficulty, however, began with Chapter 30. From
here on it was ... a matter ... of putting the train of thought
into proper order" (CIII 6). It is an open question, to what
extent the material dealt with there belongs to the general
analysis of the capitalist form of society, e.g. to a theory of
money. For those without a special interest in this question we can
offer the advice to skip chs 30-35.

Part 6

It is helpful to read the beginning of the text,
CIII 614ff. carefully, as Marx states explicitly the assumptions of
the subsequent presentation. That rent is not a
"characteristic peculiarity of agriculture" is expressed
CIII 637ff.

Thanks to Engels - who used Marx's hints (cf. CIII 762f and
7) - this part is clearly structured. For good information about
the topics (especially the sub-forms of differential rent) see the
table of contents CIII p X.

Part 7

With the possible exception of the three fragments
which Engels placed at the very beginning of the text and his
remarks (which might not be true) "here the manuscript breaks
off" (CIII 817) and "here one folio sheet is
missing" (CIII 822) - the text as printed in CIII does not offer
editorial problems but a number of systematic ones.

The fragmentary character of this final part of Capital
is a real pity. That this fragment remained unfinished without any
attempts to complete it in the years 1866-1883 (cf. Marx's
letter to Engels of February 13, 1866) must cause astonishment.
Worth reading is the appendix "Revenue and its sources",
printed at the end of the third volume of "Theories' of
Surplus-Value", which was written two or three years before
the corresponding text in Capital.